Opportunities in the China Education Market

Transcription

1 Opportunities in the China Education Market Prepared for the HKVCA- MasterClass Hong Kong December 2014

2 Interest in Education sector in Emerging Markets is increasing Completed M&A Activity in Emerging Private Education Markets, , n= n=637 Others Others 400 n=349 Others n=101 Others Asia Asia Asia % Deals in Asia 16% 51% 57% 52% 2

3 China is the largest private Education market in Asia Private K-12 and Higher Ed Market Sizes in Asia, 2012 UAE $1.5B China $14B India $8B Malaysia $3B Singapore $2B 3

4 Growth in China is being driven by increasing affordability China Annual Disposable Income and Population in Major Education Target Age Group, F 100% 80% Households with annual disposable income above $35K 60% 40% 20% 0% F Households with annual disposable income above $35k are expected to continue growing at 21% per year 4

5 And low penetration of private services Penetration (Enrollment/No. of Students Who Can Afford), % ~20% ~7% 5 0 Branded Organized Tutoring Study Abroad 5

6 International Curriculum Dual Curriculum Tutoring One on One Classroom $0.9B Study Abroad Premium Pre-K English Focused Mandarin Focused $0.5B The total Chinese private education market is $21B Market Size of the China Private Education Market, % $12.3B Private Universities Private Colleges Independent Colleges Higher Ed $4.6B Adult ELT PreK-12 ELT $1.5B Private K-12 $0.8B Others Top 8 Cities Overseas Test Prep IELTS TOEFL Others $0.4B Total = $21.1B 6

7 Major Investment Themes Early Years Pre-K English Language ELT Dual Curriculum Schools Study Abroad Education Tech 7

8 Dual language offerings are growing faster Enrollment of Premium Pre-K Chains in the Seven Largest Cities, % 13K 59K Total = 72K Mandarin Focused 80 Mandarin Focused English Focused CAGR Growth 20 English Focused 15-20% 10-15% 5-10% 0-5% 0 Super-Premium ($8+K) Premium ($4K-8K) 8

9 Major Investment Themes Early Years Pre-K English Language ELT Dual Curriculum Schools Study Abroad Education Tech 9

10 Number of English hours China has among the lowest in-school provision of English language Number of Hours of English Language Provision/Week in Schools 6 Hours ~6 ~5 ~5 ~5 4 ~3-4 ~3 ~ India Malaysia Thailand Hong Kong China Japan Vietnam 10

11 The ELT market is forecast to continue growing at ~13% a year in the major cities ELT Market Size by City, F 2,000 1,500 $1,600M CAGR '11-'14 8.9% CAGR '14-' % 1,000 $970M $630M Top 7 Cities F 11

12 Shenzhen Chengdu Suzhou Hangzhou School 1 School 1 School 2 $16M School 1 School 2 $33M School 2 School 3 Dual curriculum market in the 7 largest cities is ~$550M and enrolls ~54K students Market Size of Dual Curriculum Schools by Cities, % $244M 21 School School 33 School 24 School 22 School 23 S chool 30 School 14 School 13 School 12 School 11 School 10 School 9 School 6 School 5 School 4 School 3 School 2 School 1 Beijing $148M School 17 School 16 School 3 School 14 S chool 13 School 12 School 11 School 10 School 9 School 8 School 7 School 6 School 5 School 4 School 3 School 2 School 1 Shanghai $67M School 3 School 2 School 1 Guangzhou $30M School 5 School 4 School 3 School 2 School 4 School 3 School 3 School 1 $10M School 4 Total = $546M All schools with <60% utilization established their international programs within the last 5 years or added capacity within the last 3 years > 80% Utilization 60% to 80% Utilization < 60% Utilization Total Enrollment Average Price ($) Number of Schools 19K 13K 7K 4K 3K 5K 2K 13K 11K 9K 7K 6K 6K 4K

13 Regulatory Landscape Shanghai Example Licensing G10-12 international programs looking to continue operations need to be inspected and accredited by the Shanghai Education Committee All international program operators must own private school licenses and have qualified faculty Public schools are not allowed to partner with external operators for international program operations Fee Control Intended number of new enrolments and tuition fee changes of all international programs need to be reported to and approved by the local education committee Public operators are not allowed to charge premiums on international programs; tuition fees must be set at the same as the schools regular PRC curriculum programs 13

14 Major Investment Themes Early Years Pre-K English Language ELT Dual Curriculum Schools Study Abroad Education Tech 14

15 The flow of Chinese students studying is expected to grow at 15% for next four years Number of Chinese Students Commencing Overseas Education, F 1,000K 800 CAGR CAGR 869K '18E 18% 15% EA K CA K 375K ANZ UK 200 US E 15

16 Business based on the study abroad theme are witnessing growth China Total Organized Test Preparation Market Size, USD, F China Total Agent Market Size, USD F $2B CAGR (10-13) 47% CAGR (13-18E) 21% RMB1.5B CAGR '10-'13 23% CAGR 13-'18F 17% 1.7B $1.2B 1.5 Rest of China 54% 35% 1.0 ROC 22% 18% $0.2B $0.7B Top 8 Cities 37% 17% 0.5 $0.3B $0.6B Top 8 Cities 24% 16% F F 16

17 Major Investment Themes Early Years Pre-K English Language ELT Dual Curriculum Schools Study Abroad Education Tech 17

18 Education Technology Adoption increases significantly once efficacy is proven to customers Potential Online Curriculum Adopters as Percent of Population, Based on a Survey of 2,000+ Chinese, Brazilian, South African, and Indian Parents 15.0% 15.0% Increase to ~4x 6.0% 1.5% 0.0 Early Adopters Followers (Will Adopt If Proven) In 5-10 Years (Potential Long-Term Adoption) 18

19 Professional Early Adopters In China, parents in Tier 1 cities, especially those with a professional background, are more willing to support online education for their children Willingness of Online Adoption by City Type Willingness of Adoption by Profession Time Spent Per Day With Child for Education by Profession 5x 4.5x 2x hours x hours Tier 1 1.7x Tier 2 x Tier 3 x China China China 19

20 Value Addition Opportunities Among Chinese Education Companies Student Acquisition Site Selection Pricing Operations Improvement/Cost Optimization 20

21 About and the Education practice About and EY combined with Ernst & Young LLP on August 29, is a leading advisory organization focused on strategy consulting. We are committed to combining our unconventional thinking with our clients smarts to deliver actionable strategies. In today s complex business landscape, creativity has become a necessary ingredient for sustained success. Together with EY, we have an ideal balance of strengths specialized expertise with broad executional capabilities, intimate client relationships with larger networks of support, and proven processes along with a progressive spirit to unlock opportunity for our clients, amplify the impact of our strategies, and make the global partner of choice for business leaders. About s Education practice has served as an advisor to the education sector since our inception in Our Education practice the first of its kind across management consulting firms has an explicit mission and vision to be the leading strategy advisor to the global education industry. To achieve this, we invest significantly in dedicated management and team resources to ensure that our global expertise extends across public sector and non-profit education providers, foundations, for-profit companies and service providers, and investors. has deep experience and a track record of consistent success in working closely with universities, colleges, states, districts, and leading educational reform and service organizations across the globe. Follow Us for Regular Updates Facebook LinkedIn 21

22 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. and -EY refer to the combined group of and EY professionals providing strategy services worldwide. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US Ernst & Young LLP. All Rights Reserved. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com